Customers flock to this online bank for rates that beat the big banks

Royal Bank of Canada currently offers a special rate of up to 2% on its high interest electronic savings account. The convoluted terms and conditions of this offer may help explain why the money was sent to EQ Bank, an online competitor of RBC and the other big banks.

EQ Bank was launched in early 2016 and a year ago it had assets of around $ 2.7 billion. In February, EQ hit $ 5 billion. “It’s quite remarkable,” said Mahima Poddar, head of personal banking services at EQ’s parent company, Equitable Bank, in an interview this week. “During the pandemic, we crossed $ 3 billion, $ 4 billion and now $ 5 billion in assets.”

What’s going on at EQ is worth a look as it tells us a lot about the state of alternative banking today. Customers are more open than ever to transferring their money.

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EQ offers 1.5 percent for regular accounts and 2.3 percent for tax-free savings accounts and registered retirement savings plans. RBC’s regular rate on its electronic savings account is 0.05% and its bonus interest offer is a confusing and unnecessary marketing model.

If you visit RBC online promotion for eSavings, skip ahead to the dense 351-word footnote that refers to calculations involving a regular interest rate, an initial bonus interest rate, and a subsequent bonus rate. You must also open a registered account – TFSA or RRSP – to obtain a temporary rate of 2%.

EQ’s regular savings account rate isn’t quite the highest, but RRSP and TFSA rates are exceptional and, therefore, very likely to be reduced. At a time when the pandemic is driving high savings rates for households where jobs and incomes have remained stable, offering higher rates than the big banks is resonating with people like never before. The number of people banking at EQ has grown to over 185,000, from around 102,200 a year ago, and new account registrations are about 150% higher than they were before the pandemic began. .

EQ entered the pandemic with a rate of 2.45% on its regular savings account, then cut rates to 2%, 1.7% and finally to the current level of 1.5%. You may have heard of rising rates in the bond market putting upward pressure on the cost of fixed rate mortgages. Savers should be aware that the rates they get on their money are unaffected by this trend, making rate increases on savings accounts very unlikely.

In fact, the rates that guide savings account returns remain stuck in the basement. A 12-month Bank of Canada T-bill has a rate of around 0.2 percent these days, which tells you that EQ and other alternative banks are offering premium rates that are well above. beyond what is happening in the financial markets.

“At the moment, we are very invested in trying to maintain the rate,” Ms. Poddar said. “But there are realities in terms of how long it can go on if the market doesn’t catch up with us.”

The rise of EQ in new business reinforces a lesson learned in the investment industry: Even digital financial players need a well-managed call center. Eye-catching apps and websites aren’t enough.

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Online brokerage clients reported wait times measured in hours to contact live representatives. Ms Poddar said the average wait at EQ was, at worst, 10 to 20 minutes, with a maximum wait of one hour. The bank’s call center staff has grown by 250% since the start of last year.

“When you’re digital, the call center is even more important because it’s your only real point of contact,” Ms. Poddar said. “It’s almost like a moment of truth for customers – it’s their only one-on-one engagement with the bank. We better be there, we better have the answers.

Upcoming upgrades from EQ Bank include US dollar accounts with competitive rates for interest paid and conversion from Canadian dollars to US currency. What you won’t see: Temporary offers with 351 word footnotes.

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David A. Albanese

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